Living through a week of frozen hell in Texas during the recent power outage is something I never want to do again. Beyond the emotional damage, there has been a staggering amount of loss. Dozens of terrible, preventable deaths have been attributed to the power outages from the storm. Then there is the monetary costs. Estimates vary dramatically but catastrophe modeling agency Karen Clark & Co. estimated losses from the storm at roughly $18 billion. Other models show claims from the freeze and extended power outage could reach $90 billion. The Perryman Group projected the cost of the storm could end up as high as $195 billion on the low end and as much as $295 billion on the high end, accounting for lost income and the long-term reduction in economic output, which are not covered by insurance. Added to all of this is the fact that Texans are on the hook for an estimated $3.2 billion in electricity overage charges following the winter storm.
Statewide, politicians, regulators and industry leaders are working to make sure no Texan ever has to suffer like that again. Solving the problem will require a hard look at how the state failed to prepare. The property management industry can also learn from this disaster. Unlike many of the state’s power grids, many properties were exceptionally prepared. But, the challenges faced while trying to keep occupants safe and protect buildings from damage during an untimely power outage has lessons for the property industry.
The Tuesday before the storm, roughly five days before the power outages started, property managers began pre-freeze protocols, topping off generators, taking inventory of de-icing supplies, securing nearby hotel rooms for on-site personnel, draining lines where possible, dripping faucets, closing certain gas line valves, turning off irrigation and draining and proactively calling to arrange for fire watch services where fire systems were drained. Property managers worked with the cities to lower building temperatures so that more power could be deployed to emergency systems and hospitals. When the storm hit, most properties became inaccessible as roads froze over.
At that point, there was only so much property managers could do.
“When our property managers couldn’t get to the properties safely, our engineers stepped up and became the unsung heroes of the time,” JLL Senior Vice President and Austin property management lead Sam Shannon said. Shannon’s team does annual training in 30 different emergency scenarios, jumping into action to do what they could. “I can’t commend their efforts enough. The engineers were first on-site and able to assess and communicate early on what each property looked like. We saw that across the board with our peers’ properties and engineers too.”
Engineers lucky enough to be working at properties with smart building technology were able to remotely access the buildings when power was restored to make simple adjustments to the buildings electrical demand to ease pressure on the state’s failing grid. Many engineers had to make the dangerous trek to the properties, manually disconnecting equipment so that when power did turn the power back on, it didn’t surge, damaging the tenant or the landlord’s property.
When it freezes, it pours
Water damage was also a major threat. Many buildings have heaters in riser rooms where there are exposed walls that are used to prevent pipes from freezing, but these are electric. The loss of power meant the heaters didn’t work. On-site staff had to make a tough call, drain the fire lines and arrange fire watch or simply wait and see if lines were able to survive the freeze without bursting.
“The biggest threat was the power outage because it escalated the probability of freezing pipes exponentially. All of the snow and ice was expected, but when the power went out, it added an entirely new level of concern,” JLL Senior Vice President Mike Hagmann said. “The variable that no one expected was the long-term power outages. A lot of our actions became reactive.”
When the storm eased late in the week, property managers were able to start assessing the damage. Office managers will look to make repairs while office occupancy is still stunted by the pandemic. Multifamily managers don’t have that luxury. Tens of thousands of renters are still without water or have some form of damage in their unit. I can tell you from personal experience that not having water was life altering. Even if you have drinking water you learn quickly that toilets need water to flush. Eventually, residents at my building got savvy (or desperate depending on how you look at it) and started bringing buckets of pool water up to their units to keep the waste moving. While my building seemed to be fine, once the temperatures climbed above freezing again many multifamily residents were unpleasantly surprised by cascades of water in their homes.
There is only so much that can be done to stop pipes from breaking when water expands as it turns into ice. But well designed insulation and backup heating units can help prevent catastrophe. Protocols can also be put in place for managers and tenants to drip their lines, as moving water doesn’t freeze as easily.
“To me, a huge part of the story is that a few hundred million of mitigation investment over the last decade or so, since the 2011 FERC report, and a bit more planning could have probably prevented 90 percent of the damage,” Enki Research disaster modeler Chuck Watson told Insurance Journal.
Watson is referring to a 2011 report from the Federal Energy Regulatory Commission, warning the Texas Public Utility Commission of the very issue that crippled Texas’ grid. The report came shortly after a similar situation in 2011. A similar report was written up in 1989, once again, after a winter storm nearly crippled the grid. “All utilities should ensure that they incorporate the lessons learned during December of 1989 into the design of new facilities” and “ensure that procedures are implemented to correct defective freeze protection equipment prior to the onset of cold weather,” the 32-year-old report recommended.
That advice went unheeded for three decades until it resulted in disaster at unfathomable scale. Texans are demanding something finally be done.
Fallout has already begun. Following calls from Governor Greg Abbott and Lt Governor Dan Patrick, seven board members of the Electric Reliability Council of Texas (ERCOT), tasked with ensuring the state’s grid, have resigned. ERCOT CEO Bill Magness was fired. Public Utility Commission chairwoman DeAnn Walker, tasked with overseeing ERCOT, resigned, followed by Public Utility Commissioner Shelly Botkin a week later. Personnel changes won’t solve the problem but are key to accountability. Real reform will come from lawmakers during Texas 87th legislative session. The Texas state legislature only meets every two years, lucky for Texans, the winter storm wreaked havoc while the legislature was in session, meaning the issue has become an immediate priority. Seven bills in the House and two in the Senate look to reform the state’s grid stability.
The 2011 FERC reports estimated weathering and winterizing 50,000 gas wells would cost between $125 million and $1.75 billion. A costly endeavor most electricity providers skipped out on. Currently there’s no requirement to winterize, so they haven’t. That’s likely the first step in real change. House Bill 11 would require electric transmission and generation facilities in this state to be weatherized. The bill is one of the nine being debated in Austin. Other bills look to restructure ERCOT’s board, create a statewide disaster alert system, ban variable-rate providers, and prohibit planning authorities from connecting buildings to specific infrastructure based on the type of energy source being delivered. None of the bills look to alter the structure of the states’ deregulated energy market. The Texas Senate is working to get to the bottom of billions in electrical overage charges as high as $9,000 per megawatt-hour. Without some sort of change, Texans will foot the three billion dollar bill for electricity they didn’t have. Whatever happens at the Texas Capitol will need to be done before the session ends at the end of May.
“I am proud the Texas House is leading the charge in protecting consumers, fortifying our grid, and creating clear lines of communication and authority during extreme weather events,” Speaker of the House Rep. Dade Phelan said in a statement. “We must take accountability, close critical gaps in our system, and prevent these breakdowns from ever happening again.”
The commercial real estate sector did everything it could to mitigate damage and suffering, but no matter how heroic the efforts, the fortunes of Texas’ property sector are bound to an electrical grid it has no control over. By its nature, the property management industry is a proactive sector. Protecting the state’s most valuable real estate assets requires you to be. More than 32 years of dealing with a vulnerable electrical grid has taken away Texas’ chance at being proactive. This time, Texas has the chance to react the right way.